Bet on AI Mammals, Not Dinosaurs.

There's no doubt that AI is the ‘shiny new toy’, as exemplified by Nvidia’s current market capitalization, now hovering at $3 billion, or the kinds of massive infrastructure build-outs underway by OpenAI, xAI, Meta and others. The investment inflows are highly concentrated on the biggest players. It’s well beyond the levels of earlier tech fads like blockchain, perhaps for good reason; AI offers the promise of decades of economic benefit, and yes, disruption. The sheer scale and pace of current investment are unprecedented… but some analogies can be instructive.

It’s important to note that much of the current over-concentration has happened before in technology. In the early days of computing itself, only the very largest companies and governments had the resources to build functioning computers. As a result, the earliest computers, mainframes, cost millions of dollars each to build and were only deployed in small numbers. It took decades for them to evolve into minicomputers, then desktop and laptop computers, and finally smartphones. Today, the traditional mainframe is a dinosaur, no matter what IBM may sometimes claim. Despite this and other clear precedents, the investment community and press are focused on the largest AI players today, with varying degrees of over-investment and valuations that are hard to justify without winner-take-all outcomes.

In today’s hyperconnected, much more distributed and prosperous world, evolution that used to take decades is now happening in months. Over the last year, we’ve seen many of the best research work and real-world results in AI shifting from closed, highly centralized models like OpenAI’s, to increasingly powerful midsize and small open source models that can be deployed anywhere, including on off-the-shelf servers and even mobile devices. As this trend accelerates, those who bet on the early, centralized approach may struggle to get good returns on their investments. Coviello and others like him are anticipating an ‘extinction event’ if an investment pullback occurs. 

Meanwhile, growing numbers of technically savvy, hyper-aware software and hardware engineers are innovating with open source AI faster and faster, across a broad front. As a result, thousands of smaller companies are building meaningful AI solutions to solve real-world problems for their customers. These are the unsung heroes of the current boom; think of them as mammals. As the AI dinosaurs get larger and larger, nearly incapable of sustaining their own mass, these mammals are thriving. My own company, Axle AI, is just one such example; we develop AI software that helps media companies and corporate teams search and reuse their content for social media. Our business, with a customer base of over 1,000 teams worldwide, has grown at an accelerating pace since its founding in 2018 and is profitable today. In countless market segments, from healthcare to fintech, new and existing companies are harnessing the potential of AI to build solutions with real benefits and customer returns on investment.

The challenge for investors and customers is to identify these mammals, many of which may be long term winners in the AI race. This isn’t to say that outsized returns may not happen for investors lucky or insightful enough to pick the few dinosaurs that survive the coming shift. But if you want to win, bet on the mammals. 

- Sam Bogoch, CEO, Axle AI